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FD or T-bill? 3.8% p.a. fixed deposit for 5 months tenor!

Friday, November 18, 2022

A few days ago when I logged into my DBS phone app, a message popped up with a special offer.

3.8% p.a. fixed deposit for 5 months tenor.


It was like discovering an endangered species.

I have always thought DBS has the most liquidity sloshing around with the most CASA (i.e. current account and savings account) money from customers amongst the local banks.

DBS has benefitted immensely from cheap funding from relatively conservative POSB customers.

DBS has also routinely said that they were extremely well capitalized.

Are they feeling the heat now or are they making a pre-emptive move to lock in some liquidity?

Whatever the case may be, it isn't my problem.

My question was: "What to do?"

In my last blog, I expressed my disappointment that the cut off yield of the 6 months T-bill was only 4%.

I also expressed my disgust at people who made very low bids in order to get all the T-bill they applied for as that probably resulted in a lower cut off yield.

The problem with T-bill is that we won't know what the yield is until the auction is over.

Could the cut off yield be lower than 4% this time?

Yes, another T-bill auction is now open.

Could the cut off yield, heavens forbid, be even lower than 3.8% this time?

Like I said in my last blog, I suspect it would depend on how competitive (and inane) people get.

This is especially the case with people using their CPF-OA savings which are akin to elephant guns to apply.

I understand that it is costly both in terms of time and money to use CPF-OA savings to apply for T-bill. 

If these people do not get their applications fully filled, it would mean another trip or a few more trips to the bank.

Using CPF-OA funds is costly not only because there is an application fee and a monthly service fee, we will also lose out on one or two months of CPF-OA interest at 2.5% p.a.

This is because CPF-OA interest is calculated on a monthly basis and not a daily basis.

So, if we withdraw money from our CPF-OA at the start of the month, we will not have interest income for one month.

If we withdraw money from our CPF-OA in the second half of the month, we very likely would not have interest income for two months. 

This is because when the fund comes back from the T-bill, it most likely would not be credited into our CPF-OA in the same month but the following month.

CPF interest is calculated based on the lowest monthly balance. 

So, having the incoming fund credited in the following month means no interest income for that sum in that month.

Therefore, if we are unsuccessful in a T-bill auction using CPF-OA savings, it is painful in more ways than one, especially if the amount of money involved is relatively large.

I can understand why these people are more kiasu than others.

Still, I want to apply for this round of T-bills because the yield could be higher than 3.8% p.a.

At the same time, I also put some money in the fixed deposit special offer by DBS.

In case you are wondering, the special offer is for a minimum sum of $20,000 while the minimum sum required for T-bill is only $1,000.

If you are interested in the special offer by DBS, use their banking app to start a fixed deposit account.

Their promo code for this is SR7M.


Yv said...


Promo code seems to have expired.

keng said...

Hi AK,

Think SR7M promotion just expired last night :(

AK71 said...

Hi Yv and Keng,

I just placed a fixed deposit yesterday when I was crafting this blog.

The code was still valid.

The code has to be used with the mobile banking app and not internet banking on a PC.

I hope yesterday wasn't the last day of offer.

AK71 said...

Hi Yv and keng,

I just checked again.

You are right.

The code has expired. :(

The code now available is SR3M which is 3% p.a. for 6 months tenor. (TmT)

keng said...

With the current environment, we can probably expect more FD promotions coming our way. Be patient and wait for more :)

AK71 said...

Hi keng,

I agree with you.

It is just a bummer that this stealth promotion lasted only a few short days.

I would have blogged about it sooner but I was busy exploring the new zones in both Genshin Impact and Neverwinter.

Both worlds had major expansions.

Anyway, next fixed deposit promotion might be 4.1% p.a. for a 5 months tenor. ;p

Crossing fingers. :D

HappiSnoey said...

Hi Ak,
FYI UOB offering 6 months 3.85% (50k).
Competition for funds is hitting up ;)
Have a good weekend!

AK71 said...

Hi HappiSnoey,

Thanks for sharing this. :D

$50K is a bit too much for me to put in a single fixed deposit.

$20K to $25K is more palatable.

The reason is because if I needed to break a fixed deposit, I wouldn't lose as much interest income if the amount was smaller.

So, my strategy has always been to have multiple fixed deposits ranging from $10K to $25K per deposit.

Still, good news that the fixed deposit battle is heating up. :D

Ok said...

Dbs fixed deposits impose withdrawal penalty for early withdrawal.

AK71 said...

Hi Ok,

Ah, I suppose that is one reason why some people avoid DBS fixed deposits.

This is my first fixed deposit with DBS.

Have never bothered before this because their offers were never attractive enough.

ck said...

Many thanks for your helpful info.
Is it possible that CPF increases the current rate to more than 2.5%/4%?
Thanks again!

AK71 said...

Hi ck,

I think there is a chance that we could see CPF-SA interest rates go up as the plan has always been to peg that to the yield of long term Singapore government bond.

However, the CPF-OA interest rate is guided by the regular fixed deposit rates (and not the promotional rates) of the local banks and I don't see that going up anytime soon.

F@ng said...

how about ocbc 7.65% w spend ($500,) save ($500/mth), salary credit, insure ($2000), invest (nil min), and $200,000 360 savings account at 7.65%?
Any thoughts?

F@ng said...

Thinking of OCBC 360 if the insure and invest bit fits into the plans eg ETF monthly and/or mortgage protection insurance.

AK71 said...

Hi F@ng,

OCBC 360 has conditions which I cannot meet as a retiree.

Well, the insurance condition, I can meet but I don't need more insurance.

So, not for me.

garudadri said...

Dear AK
I have a contrarian albeit risky view
I expect the FD and SGS/ T bills and other fixed income deals to peak soon and then they might fall as too much money is chasing yield and understandably so
This might trigger a correction in the equity market , especially in Singapore
Time and again, we see the bank dominated STI face resistance beyond 3200 and almost certainly falls after reaching 3400
The STI has just crossed the 200 DMA and is also above the 50 and 100 DMA
If inflation falls, as it most certainly will, another 5-10% upside is easily feasible
Difficult to imagine FD rates staying high for long

AK71 said...

Hi Garudadri,

Your comment got me revisiting my plan.

Decided to publish my reply as a blog:
Add banks and enjoy higher interest income too.

Thanks for the thoughtful comment. :)

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